Louboutins or Loafers?

Let’s analyze the difference between how women (in their Louboutins) and men (sporting loafers) invest because research shows it pays to invest WITH, IN, and/or LIKE a woman.

FACTS:

• Gender-inclusive teams are 21% more likely to see out-performance in profitability relative to their peers.
• Female CFOs deliver a 6% increase in profits and an 8% stock performance bump compared to overall performance under male predecessors.
• New companies with a female founder performed 63% better than those with all-male teams over an observed ten-year period.
• Women-run hedge funds outperformed the average of larger hedge funds by a margin of 6% over a six-and-a-half-year period

In a nutshell, diversity finds ​alpha.

So, just what is “alpha?” Alpha is a term used in investing to describe an investment strategy’s ability to beat the market, or its “edge.” Alpha is thus also often referred to as “excess return” or the “abnormal rate of return” in relation to a benchmark, when adjusted for risk.

American women by themselves are the largest national economy on earth. By 2020, women will control roughly 2/3rds of the wealth in the United States, and yet only 30% of the Registered Investment Advisors are women and less than 10% of venture capitalists are women.

Study after study shows that women invest differently than men. From less overconfidence, over-trading, and testosterone to a greater tolerance for market noise and more consistent application of investment strategy, women approach investing in a unique way.

Diversity in who is making the financial decisions, in addition to diversification of investments, be it by strategy, asset class, or gender, is good for ALL investors.

Now for the three things I’ve read…

1. ​Meet the Harvard student who grew ‘Girls Who VC’ to 1,500 members in six months​ in the Boston Business Journal: “… More women in general-partner roles would not only attract more women to the VC industry, but ​would also translate into more funding for female founders​, according to many Boston-area female VCs…”
2. ​Thar SHE Blows?​ ​Gender, Competition, and Bubbles​ ​in Experimental Asset Markets​: “…Empirical studies report gender differences in financial decision making related to risk aversion or overconfidence.2 But empirical studies of women in financial markets cannot avoid the fact that female traders reach their positions only at the end of a lengthy selection process, in a male-dominated environment with a strong culture of machismo (Roth 2006). Women in finance-related fields are likely to have acquired masculine attributes in order to survive in this environment, introducing potential biases into empirical comparisons of male and female finance professionals. Thus, we make use of experimental methods to uncover gender differences in financial behavior...”
3. ​Investing in Women Isn’t a F$$king Charity​ by ​Jesse Draper​ (yes, of ​THAT Draper​ family): “… Until those in positions of power at family offices, institutions, ​Fund of Funds and endowments at the Limited Partner level ​change their hundred year old investment philosophy, nothing changes. Also, I have seen firsthand, women were taught not to talk about money and to donate it as opposed to invest it. These dynamics need to change as well. Because I focus on women-led businesses, people often think I’m running a social enterprise rather than a for-profit business — despite what the numbers show. So I don’t have the luxury of walking away from opportunities to raise money — no matter how uncomfortable they make me.”